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CHARTER COMMUNICATIONS, INC. /MO/ filed this Form S-1/A on 11/04/1999
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ming. Under the 1996 Telecom Act, the Federal Communications Commission can
regulate cable programming service tier rates only if a local franchising
authority first receives at least two rate complaints from local subscribers and
then files a formal complaint with the Federal Communications Commission. When
new cable programming service tier rate complaints are filed, the Federal
Communications Commission considers only whether the incremental increase is
justified and it will not reduce the previously established cable programming
service tier rate. We currently have rate complaints relating to approximately
240,000 subscribers pending at the Federal Communications Commission. The
Federal Communications Commission's authority to regulate cable programming
service tier rates effectively expired on March 31, 1999. The Federal
Communications Commission has taken the position that it will still adjudicate
cable programming service tier complaints filed after this sunset date, but no
later than 180 days after the last cable programming service tier rate increase
imposed prior to March 31, 1999, and will strictly limit its review, and
possibly refund orders, to the time period predating the sunset date. We do not
believe any adjudications regarding these pre-sunset complaints will have a
material adverse effect on our business. The elimination of cable programming
service tier regulation, which is the rate regulation of a particular level of
packaged programming services, typically referring to the expanded basic level
of service, on a prospective basis affords us substantially greater pricing
     Under the rate regulations of the Federal Communication Commission, most
cable systems were required to reduce their basic service tier and cable
programming service tier rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The Federal Communications Commission
has modified its rate adjustment regulations to allow for annual rate increases
and to minimize previous problems associated with regulatory lag. Operators also
have the opportunity to bypass this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Cost of service regulation is a traditional form of rate
regulation, under which a utility is allowed to recover its costs of providing
the regulated service, plus a reasonable profit. The Federal Communications
Commission and Congress have provided various forms of rate relief for smaller
cable systems owned by smaller operations. Premium cable services offered on a
per-channel or per-program basis remain unregulated, as do affirmatively
marketed packages consisting entirely of new programming product. However,
federal law requires that the basic service tier be offered to all cable
subscribers and limits the ability of operators to require purchase of any cable
programming service tier if a customer seeks to purchase premium services
offered on a per-channel or per-program basis, subject to a technology exception
which sunsets in 2002.
     As noted above, Federal Communications Commission regulation of cable
programming service tier rates for all systems, regardless of size, sunset
pursuant to the 1996 Telecom Act on March 31, 1999. Certain legislators,
however, have called for new rate regulations if unregulated cost rates increase
dramatically. The 1996 Telecom Act also